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Loan dispersal delayed to NSMU, community college freshmen

By Lindsey Anderson

landerson@lcsun-news.com l_m_anderson on Twitter

Posted:
09/09/2013 11:22:52 PM MDT

LAS CRUCES >> About 900 first-semester freshmen at New Mexico State University and its community colleges won't receive their federal student loans until Sept. 20. University officials implemented the delay in an attempt to address rising student loan default rates at the school.

First-time freshmen borrowers are the mostly likely to leave college and not pay back their loans, said Bernadette Montoya, NMSU's vice president for student affairs and enrollment.

"We think (the delay) will help our students and promote financial management," she said. "...This gives them time to say, 'Do I really need that $2,000 loan?'"

NMSU's loan default rate has risen steadily over the past few years, rising from 7.9 percent in fiscal year 2008 to 12.8 percent in fiscal year 2010, the latest available data from the U.S. Department of Education.

More than 4,300 NMSU students were in the federal loan "repayment" period in fiscal year 2010, about 10 percent of enrolled students, while 560 were in default, according to the department.

NMSU's rates are more than twice those of the University of New Mexico for those years, and about twice as many Aggies took out loans each year.

"We don't want that default number to rise, because there are consequences," Montoya said.

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Federal loans are generally determined based on financial need and must be repaid with interest, though often at a lower rate than private loans. Those who fail to repay the loans are "in default" while those who are successfully paying them off are "in repayment."

Defaulting on a loan can lead the school, government and other agencies to take action to recover the money owed.

Once students take out a loan, it must be repaid whether or not they graduate.

"We bill them," Montoya said. "We have to bill them because we have to pay the federal government back."

Students' schedules fluctuate during the first few weeks of school, Montoya said. Many drop credits and need less in loans than they initially requested.

Tuesday was the last day for students to drop a class without receiving a "W" for "withdrew" on their transcripts.

So NMSU officials say the school is proactively delaying students' loan dispersals for 30 days, a not uncommon practice in higher education, to ensure they still want the loans.

All other student financial aid, such as scholarships and grants, has been dispersed without delay, Montoya said.

The 900 students can register for classes and secure housing without making payments, Montoya said. They have been "flagged" in the system as students whose loan payments are delayed.

Students can also buy up to $500 in books on credit from the bookstore each semester, she said.

But for freshman Kiera Humbles, 18, that $500 credit wasn't enough to cover her books, and she paid the remainder out of pocket.

The financial lesson NMSU is trying to teach is a good one, said the aspiring veterinarian. "But for the people who were serious about it (school), it screws them over."

Students with "pressing personal issues" can request their loans be dispersed early, Montoya said.

The university alerted students to the change "quite some time ago," Montoya said.

"We have not had push-back that I'm aware of," she said.

In January, the now second-semester freshmen will receive their loans at the same time as other students, while loans for the new crop of first-time freshmen will be delayed, Montoya said.